In November, General Electric slashed its quarterly dividend by 50% in order to free up cash—something the company has only done twice before: in 1939 and 2009. Then in August, John Flannery took over from Jeffrey Immelt, rising to CEO in a move aimed at overhauling GE. He said the firm would also sell a dozen businesses worldwide, for $20 billion.

And yet, at about the same time, Nigeria’s minister of Transportation and Aviation, Rotimi Amaechi, announced that the US firm planned to invest $2.7 billion in rail transport.

What makes Africa so special for GE?

The rationale for this decision is understandable: GE wants to take advantage of Africa’s large size and industrial infancy. Jay Ireland, CEO of GE Africa, noted in a TV interview that Africa is “a billion people and it continues to grow.” Africa was in the initial stages of industrialization, which therefore made it a good market for America’s industrial goods.

GE says its sub-Saharan Africa operations employ more than 2600 employees, earned revenues of about $3.3 billion in 2015 and run across 33 countries, with special efforts in Nigeria, South Africa, Angola, Ghana, Mozambique and Kenya.

Nigeria, Africa’s Biggest Market

GE acknowledges its renewed focus on the country over the last three years. GE now employs 500 Nigerians, nearly a fifth of its total employee strength on the continent. It has over 100 private and public sector clients in the country. The planned $2.7 billion investment will be GE’s largest investments in Africa.

Pabina Yinkere, director of Institutional Sales at Lagos-based Vetiva Capital Management, says that GE is well invested on the other continents but not Africa. And Nigeria is a logical operation base for it. “Every company looking for growth and expansion cannot run away from Africa,” says Yinkere. “And if you are in Africa, you cannot run away from Nigeria.’’

The World Bank put Nigeria’s population at nearly 186 million in 2016 making it the largest country by population in Africa and a big market. It is also a high-growth market in industries in which the American company operates.

Investing in Nigeria makes sense for GE if one looks at its business composition. In a note to investors in November 2017, GE reiterated its decision to focus on its core businesses—aviation, power and healthcare. Its current operations in Nigeria cut across these sectors. The country’s infrastructure deficit offers opportunities for the firm to sell its equipment.

Railway construction, for instance, provides much room for growth, says Yinkere. According to World Bank figures, Nigeria had 3,512 km of railway lines in 1980 compared to South Africa’s 23,596 km. The situation on ground has not changed much for Nigeria since then.

The country now wants to grow its rail sector “aggressively’” notes Yinkere and to raise the volume of goods transported by rail rather than by road. This, too, is an area where GE can partner with the Nigerian government.

Nigeria’s deficiency in power production presents a potential opportunity for GE. For instance, it makes thermal engines for power plants. It can provide ongoing operations and maintenance as well as equipment. GE often supplies equipment used in building its Nigeria projects, said Abiola Rasaq, head of Investor Relations at United Bank for Africa, a Nigerian lender. These arrangements work in favor of both parties, he says.

Money Talk

The Nigerian government faces a constant lack of funds to execute large infrastructure projects. A PricewaterhouseCoopers report in 2014 estimated Nigeria’s infrastructure spend to grow from $23 billion in 2013 to $77 billion in 2025. Private sector investment would be key to funding this large amount.

This is where companies like GE can come in with their deep pockets and access to international markets. Borrowing domestically in Nigeria is costly with central bank rates being as high as 14%, says Rasaq. GE can borrow from international markets at relatively much lower rates and invest in the high-cost Nigerian economy.